good morning. i'm becky quick along with joe kernen and andrew ross sorkin. modest moves at this point. dow futures down by about 16, s&p down by less than a point. in fact the dow soared by 207 yesterday as traders had hopes the fiscal cliff negotiations would go well. s&p 500 up 27 points. that was several points above its 200 day moving average. that is normally a positive sign and those who watch the technicals on there are actually crossing their fingers to see what happens next. femt we it continue to follow the latest developments out of the middle east. israel and hamas exchanging more fire. the defense forces claiming to have targeted 100 gaza sites. the u.s. secretary of state hillary clinton is on her way to the middle east for talks with officials in a bid to try to end the deadly crisis. we've been watching oil prices, as well. and after sharp gains yesterday,

you can see oil prices pulling back about 27 cents, still just about $89 for wti crude. we will have a live report from our nbc colleagues on the ground in the middle east coming up in the next half hour. let's talk about some of the main market events of the morning. actually today fed chairman ben bernanke's speech at the economics sclub of new york is coming up at 12:15 eastern time. traders will be listening no any comments on the central bank's operation twist program and discussions about changing how the fed communicates about interest rates. operation twist expires next month. and there is some speculation the fed will continue making asset purchases by expanding the size of its $40 billion a month quantitate of it easing program. also on the economic agenda today, october housing starts released at 8:30 a.m. analysts looking for a decline in new building despite a steady stream of positive news on housing lately. yesterday the national association of home builders said the confidence between the nation's home builders has risk to its highest level in 6 1/2

years. and earnings front, a number of companies set to post quarterly results. hewlett-packard and best buy. shares of hp down more than 48% so far this year. meg whitman has a lot of explaining to do. and shares of best buy have fallen more than 41% since january. the retailer has been the subject the speculation about whether its founder will be bidding for the company to take it private. >> it's schultz. we went back and forth. >> the guy from hogan's heros. >> true. >> this guy was -- i know nothing. >> i'm not sure he's going to take over the company. >> i know it's schultz. >> let's talk about some corporate news --

>> that's unusual for them to report before the bell, isn't it? >> i always thought hp was a reporter after the bell. >> all i know is they have a different fiscal year and so they report -- this is staggered. everybody else already finished. so i usually ignore them. >> let's do two other pieces of corporate news. jpmorgan naming a new chief financial officer, marianne lake. that will happen early next year. she'll be reporting directly to jamie dimon and this is important because it re-establishes a reporting line that was taken away from the cfo post this summer after the london whale trading loss hurt the company's credibility with analysts. bra bra bra braunstein will become vice chairman. doug is one of the great deal makers out there. this is a role that may be where

he wants to spend his time. >> he was still reporting to jamie, wasn't he? >> no. he was the cfo reporting to jamie. post-whale, they took that reporting line away. >> reported to someone under jamie? >> he did it. and people started to speculate what was going to be happening. but he'll go back to being one of the lead deal makers at that company. >> the new york attorney general reportedly preparing to file a civil lawsuit against credit suisse, at issue is whether the firm misled investors who lost billions on mortgage backed securities. lawsuit expected to be filed tomorrow. it will allege credit suisse misrepresented the quality of the loans that were packaged in securities. and arch stone plans to raise up to 3.5 billion in its ipo, the apartment building owner and developer. owned by lehman brothers holdings and a thing aaron

callon used to talk about. an ill fated acquisition at the time. >> david einhorn had made the bid deal. >> target would make arch stone the biggest commercial real estate ipo ever and the listing will be in the form of a real estate investment. and twinkies aren't dead yesterday. hostess and its second largest union have agreed or a bankruptcy judge has said why don't you need mediate. try to save the 18,000 jobs. although they're been arguing for a year already. if they can't agree, they'll go back to it. but the goal is to keep the maker of baked goods like twinkies, ding dongs and ho-hos from going out of business. i have a picture of my stash. >> how much did you get? >> they were going store to store. >> and the only reason i didn't, we had such a crazy weekend.

>> two of everything, like noah's ark? >> yeah, i've been watching to see if they would make more so i'll never run out. but no movement in the boxes. >> keep one box and eat the other box. >> some new tabt -- >> i'd like to make a bet at this table right now. i did some reporting on this yesterday because i wrote my column about twinkies. there is very little chance. >> you know why we had two boxes. >> because you can eat one and save the other. >> yes. and i tried -- i got to say, i found them not quite -- for not allowing myself to have any for a long time, because you just don't eat that before. >> i haven't had a twinkie in forever. but i thought the twinkie was good. some of them like a ring ding, probably not. >> it looked like a twinkie, but it was brown chocolate, but i don't know what -- and it had

the cream in the center. >> was it rolled? >> no, it wasn't rolled. p. >> i know it looked like a twinkie because chocolate twinkie. >> i had one friday and it had been so long. it was good. >> and that bread is supposedly isn't very good. >> wonder bread. >> but they also have a wheat brand i think. >> in tech news, the u.s. international trade commission will review a judge's decision that apple didn't violate samsung patents when it made the ipod touch, the iphone and the ipad. in september, an administrative law judge said apple was innocent of violating those patents. up like $30 yesterday or something. and check out the shares of yahoo!. they reached their highest level in 18 months. analysts say investor confidence is growing that marissa mayer can pull off a comeback.

>> is is that possible? >> we can all hope. i want everybody to succeed. >> do you want bad people to succeed? >> bad in what way? >> i mean bad people. do you want bad products, bad companies? >> no, no, but i want people to -- good people to succeed. >> you just never know, though, with some people, right? you never know. they say they're good. i don't know. i think we just need to be -- let the chips fall where they may. if someone really needs our -- >> i want growth in this country. how about that? >> you have not given me any reason to think that you want that over the last couple of years. not with your anti-growth policies. you never did mention the 91% yesterday. you just totally blew -- you knew better than to bring that up. because even you can't say that with a straight face. >> i can't get behind that.

this is paul krugman whose column advocated briefly for 91% -- >> i think it's counterproductive to bring it up in an actual discussion of mainstream economic policies. he's just so out of the mainstream that it doesn't -- just giving it that much credibility of actually talking about it on on a financial network -- >> but did you talk about it. >> and i know. and i wasn't going to yesterday either. but he thinks that's the way to narrow the income disparity. >> you can't go back to the -- >> i think you can find a way of a wealth tax or something like that. >> this is the "new york times." tax policy center has now scored

what -- if you had an adjusted gross income between $1200,000 and $500,000, your average tax increase would go up $4446. do you think that's a lot, a little? >> at this point now, if people like the clinton tax structure that much, then just get rid of sequester and just question back to clinton. >> now we're getting in to the higher incomes. a married couple with two children earning $2 million, you will see your effective federal income tax rate rise to 26.8% from 21.6%. that would be your effective tax rate. >> i don't understand how that's the effective tax rate, because i don't understand how it is.

this person that i know pay 3/3%. >> they must be making assumptions some of it is in capital gains. >> unfortunately, we forget that they're marginal. >> really? i don't forget that. >> but we often talk about it as if it's sort of like a monolithic -- >> but when obama says, hey, you still get that tax cut on under 250, if you make $2 million and you keep the tax cut under 250, it's ludicrous to talk about that. >> but the effective rates versus the marginal rates is very interesting. >> effective rates are because of all the deductions and everything. but i'm at this point, i do a radio interview -- if you do do something with the mortgage interest, that has a lot of people worried about the housing industry. then if you do something with

charitable deductions, that has people really worried about the charitable world. his contention was, listen, about it worked so well, go back to the clinton tax rates. not just on 250, but let them all go back. that goes instead of 80 billion a year, it's like 800 billion out of the trillion dollar deficit that we're running. so if you're worried about the sequester, do something with the sequester, figure out a way that you don't cut spending as much, let all of them expire. and then -- sgllt president made the argument that you don't want to raise taxes on the people who are most in need at this point. that's the argument. >> that are most in need. but they don't pay taxes right now. so you're talking about people that do pay taxes that are from 50 to 250, they go back a couple of points like they did in the clinton years. that's why i say the whole argument is kind of ridiculous, that if it's below 250, wow, it's all the difference in the

world. and if it's above 250, it doesn't hurt small businesses some? it's a catch 22 on both sides because republicans said they don't want to raise taxes on the wealthiest because this is not the time to do it. >> you shouldn't raise them on anyone. but -- >> neither of them are making a holistic argument. >> right. for the left side to say you couldn't possibly raise it on up up to 200, it would hurt, but above that is fine. >> and you can't raise it on the wealthiest because it would hurt job creation. and it's not the a holistic art. >> i see the argument that every deduction has its advocacy group. and if you really want to do it easily and quickly, you know it will happen either way -- >> but that's why it was amazing that simpson-bowles actually got 11 votes. they didn't get the supermajority needed, but they got 11 votes and that was shocking because there are so many things that so many people see as sacred. >> but the only reason to do simpson-bowles and to get rid of the deconstructiduck dedeductio

and still raise marginal rates, that defeats the purpose. >> there are so many people who pay random numbers. you look at the effective tax rates, you can see -- >> rick says zero home mortgage. get rid of all the deductions and let the chips fall where they may. simple code. >> you won't have to hire a tax preparer. >> you can't spend any mothney anywhere. >> i'm proudly cheap. >> don't you get to write-off what you pay your tax preparer? >> i think you do. look, i'm good about tipping the taxi driver. but that's -- >> i saw one of the weeks that you're off because you're not coming in to the christmass

party, that's the week i'm told where things change. the rates at all the places where you go, they stay low and then there's a shift. the next week you're in christmas season, so the rates go up. you though where to go when the rates are still at the -- you know which week to take -- >> the reason i'm taking that week is because fwhi friend becky quick and my good friend joe kernen are taking christmas week. >> see, i thought it was because the very next week all the room rates go up. >> that was an add benefit that i realized after the fact. >> right. that was like a bonus. all right. time it for the global markets report. ross westgate is standing by in london. james bond does not need to be tall. did you see those numbers over the weekend, ross? must be the opening sequence. wasn't it like 150, $170 million or something is this ?

you be unbelievable. >> breaking records. >> you saw it or you were part of it. >>esty forbids. i was doing that jump -- no, i didn't do that. >> motorcycle jump. i saw that. >> yeah. joe, we're about three hours in to the session ahead of the u.s. hope and pretty flat really. advancers and decliners evenly matched on the dow jones stoxx 600. this after pretty good gains yesterday. take a look at the ftse, nearly 3% gains for the cac 40. a little more red than green. ftse only down 6 points. xetra dax up a quarter. cac 40 down 0.2%. smi down about a half percent. being dragged lower by credit suisse. talked about possible more legal action. they've also come out with a restructuring. asset management business will be followed into the private

bank business this morning. credit suisse stock down 2.3%. what is interesting, we know ubs is getting out of fixed income. doesn't appear that will be the case at credit suisse because they have promoted further up into the management board. so looks like they'll be holding on to that. we've also had an auction today out of spain. only t-bills, 12 and 18 month t-bills, but the key thing here as far as spain is concerned, and it's pushed their yields lower, they've raised a little bit more than they thought, 4.93 billion euros. this is money that they are now raising for 2013. they met the 2012 issuance. and funding targets. so anything they get in now is a head start on next year. so good news for spain. france got a downgrade from moody's. second ratings agency after s&p to cut their aaa. french yields slightly higher this morning. but no big market reaction. it was widely expected. back to you. >> ross, thank you. coming up, we'll come back

and talk what's going on in the market, but also a live report from brussels where euro finance ministers are meeting. plus the big ten could be getting a big bigger. becky quick has a little news. and your national weather forecast as americans get ready to hit the road for thanksgiving. [ penélope ] i found the best cafe in the world. nespresso. where i never have to compromise on anything.

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futures indicated a little lower. dow by about 22, s&p by less than a point. and this is coming after a big rally for the markets yesterday. carl icahn reporting an 8.9 stake. and british prosecutors plan to charge former news corp executives in connection with a bribery probe. accused of paying public officials to obtain contact informati information. >> now today's national weather forecast. todd santos -- two in a row. i don't know if that's ever happened. you know what that mean respect when you totally screw up, we'll remember from the day before.

>> all right. i will try my best to keep this one on point. you know, yesterday we were talking, there was a system still really close to the carolinas. it is moving farther off the coastline, so still gusty winds. we'll see some of the clouds on and off during the daytime. some sunshine mixing in. not looking at showers in new york. in is drier air at the surface, so a lot of it is evaporating. maybe light drizzle closer towards the lake shores. northern lower michigan, a better chance to get showers over the short term. to the south, a few more areas of the light rain. the northwest is really the messy spot today, tomorrow and on into the holiday itself. so for those of your viewers heading on out to do some skiing, looking great especially many of these western

destinations. >> but for the parade. >> no rain and temperatures in the 50s. i knee you hassled me for cooling it cool, but -- >> maybe you were calling me cool. 50s is cool for atlanta. okay. thank you, todd. >> sure thing. in squawk sports news, 49ers whipping the bears 32-7. kaepernick came in in place of the injured al lebs smith. and in college sports news, joe, you will admit this is worthy. rutgers is widely expected to announce today that it is joining the big ten. yesterday maryland announced that it will join the conference in 2014. >> i'm kind of glad. >> why? >> because then you play a real schedule. >> and you'll never have to hear about us again. >> very ratherly will i see

rutgers in the teleprompter anymore. >> this is a big deal. you this this is how you build -- they never have to beat cincinnati again. >> how much more money is in it for rut ggerrutgers? >> it's a big deal because of the high profile games they'll be playing. and the big ten gets -- rutgers is a huge media profiled team because it's so close to the new york area. >> but maryland has to pay like $50 million fee to leave? there is all this talk about how kevin planning -- >> 15 million is the break up fee apparently. >> colorado, i don't know what

they're doing every week. >>. >> but it's how you build a bigger program and penn state, with all the trouble they ran in, to they would get all the new jersey talent and they're not doing that anymore. >> do you remember the rogue trader at ubs? just found guilty. less exciting to you? >>. >> i do see you like to change the fubt with football. >> i wouldn't go to europe where they call it soccer. >> you know more about that than either college or pro, right?

>> which rogue trading was this one? >> this was one of the first ones back during the financial crisis. >> you interrupted a conference for rutgers about this? >> usual defendingdefending rut. >> silvia is in brussels with news on what may be happening over there. >> i thought when you were talking about screwing up, you were getting into the eurozone crisis management. but then i could relax again, you weren't quite. although this might be one epitaph we could put on. but on the agenda, we're talking about greece again. will they or will they not get the latest tranche.

i think we can reasonably safely say that they will get the next tranche. they were supposed to kind of agree on on that last week. but we used to this -- what is on the agenda is what will greece get in terms of relief. the 31 billion they will probably get, but what else can they get them. we all know greece can't meet the debt rerequirements in the next few years and the debt keeps mounting up. imf says they should stick to the debt sustainability that has been agreed to. what could also be decided on, a little bit of debt relief through lower interest rates.

so fash of course we've only had private sector haircuts. they said, no, we won't write-off any of our debt and that's of course a political issue because if all these leaders have to go home, we did give up part of the debt and you'll pay for it, so they have to find a compromise hopefully before we all go on the midnight oil here. >> rise above can be -- >> andrew is right, there's apparently a breakup fee of $50 million. >> used to be only 20.

they're so worried about teams leaving that they increased it to $15 million. and there was recent speculation that kevin planning just sold a big tranche of stock and some people think he'll donate that money to maryland to make up for the payment. i don't know if that's true. >> the big hower houses would be much mf- >> they do have a good basketball team. >> let's get to middle east.-mf- >> they do have a good basketball team. >> let's get to middle east.- >> they do have a good basketball team. >> let's get to middle east. israel and hamas exchanges more fire overnight.

eamon did great duty on nightly with brian williams and he's joining us from the gaza trip. >> let me start off with some interests developments. an audio recording was released saying the organization is still determined, will remain defiant vowing to continue the fight for the liberation of all palestinian lands. this is significant because there was some speculation that he himself may have been actually injured in an attack earlier this week p. the leader of the military wing was the man killed on wednesday. so still very much in command of its forces and the leader vowed to continue the fight. it has targeted about 100

different targets in the gaza strip, palestinian officials say the death toll from the seven days of fighting has reached 115 palestinians with a third being children alone. so you get a sense really that the situation here is still very volatile on the ground despite the flurry of diplomatic activity taking place in cairo. hillary clinton will be arriving later this evening to have negotiations with her israeli counterparts as well as palestinian officials. she will also be heading to cairo to meet with morsi who is meeting with the u.n. secretary general and so every is hoping truth does stick. officials have been hinting there could be one in the next several hours. but on the ground, they are bracing for a possible ground invasion with thousands of soldiers on the border.

back to you. >> stay with us over there. we'll be watching hopefully it doesn't happen, but a possibility. we appreciate your report. the nbc team over there, rich article ard engel, he must live in the area because he's always where needs to be. always things exploding around. >> when we come back, we'll talk more about the stories that are likely to drive today's trading, including the crisis in the middle east. we've also got earnings coming up and a speech from ben bernanke. we'll be talking about the looming fiscal cliff. we'll put them all into perspective. i'm glad we got cdw and cisco to design our data center.

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i'm happy. i'm happy. i'm happy. i'm happy. happy. happy. happy. happy. (together) happy. i love logistics. stocks kicking off the week with strong gains. joining us is chief market strategist. yesterday kevin had more to do with an oversold bounce or the notion that maybe we'll make progress in washington with the fiscal cliff? what do you think? oh, two kevins. ferry will talk about like chip

spreads or something. their effect on the serbian dollar. i don't know. >> market was fairly well oversold. as we look out into 2013, we certainly have the fiscal cliff that's there, but beyond that, we have a barometer that we track for fundamental conditions and that's improved for a couple months now. so that's a hopeful sign. and the market has come in pretty sharply from where we were a month or so ago. so i think we have decent valuations. >> what do you think politically finally happens? your opinion doesn't matter to anyone else obviously, we all have our opinions, but does it end up with a simpson-bowles type agreement sn. >> first you have to get us away from the crisis of january. $700 billion hits to the

economy, which is the sum total. ultimately the bigger question is what do we do with debt and deficits. the cbo has us with massive increases in taxes, very small increases in spending. and as a result, they keep the debt looking reasonable. >> you're absolutely sure that if we were to take a bite like that out of our deficit problems, and or cutting spending and raising taxes, out of the trillion dollars that we're spending over and above the deficit we're running for the last four year, 700 billion goes away, you're sure that's a bad thing near term? that's what i'm starting to think. you're taking care of almost 75% of our deficit problem in one fell swoop. it's tough and it's austerity and we demand it out of greece and countries of europe. we don't demand anything for ourses? >> i don't think anybody looks

the at the trillion dollar deficits without budgets as 234ig that anything that's sustainable. >> we can take care of 75% of it by not doing anything. >> you can take care of some of the longer term issues which i think is what the markets will be more focused on. the reality is that over the next ten years, you have to get to a point where you don't have debt rising substantially more than gdp. >> you have to do something, though. everything to this point is kicking the can down the road. >> and when s&p downgraded our debt, one of the things they cited was an inability for washington to work together. they're not going off the fiscal dilemma in one fell swoop, but if they can mak it look like they're working together better, i think that would take some of the pressure off. >> so we're agreeing at 2%, we're going over on the clip and it knocks two percentage points off, we get down to zero or

negative. but if we were growing at four, if we finally had it going agai again,ss is that the time when you cut it back to two? easier to do when you're up four? never a good time to do these things. >> here's the way i look at it. and i have my pin. it's on my tie. >> that's too low. move it up. andrew has worn it as an earring. >> we have the pin kind, so i didn't jam it in there. but here's what i think. and i'm not a big cliffer. we were more constructive. they beat us up a little last would he be and then the market came back all in one swoop yesterday. but the change the direction of the trend. and then concentrate on growth.

and so i think these grand yoes ideas and the big ten year numbers are missing the point of what's really going to happen on the on the ground level. and that is that you're going to change the trend direction of the problem. and when that happens, i think that a lot of good things happen behind it. so that's what we're dealing with right now. and what you have is an extreme low amount of volatility in the interest rate market, and extreme amount of hyperactivity over the short term in equities. and so that's good. as a trader, i'm all for something moving. but i don't think you want to drive too many big long term macro conclusions like people were trying to do last week as it was falling. there was a short lived pin kron. >> so you're basically saying the same thing, that we need to get our house in order, but we can't do it all at once is this. >> right. and i think that the the other thing is it tends to be -- globe

is talking in imf style which is always about cutting, cutting. just change the direction and then talk about a larger growth number. you want to nominally grow out of this thing. i'll give you a little contrarian type of view. my professor used to always teach me economic knowledge is inversely proportional to concern for public debt. and i think when people start to get a grip on that, then they'll calm down a little bit and just turn the direction of the problem. >> okay. we'll think about that. >> say it one more time. >> we have to do it on break. we have to go. i can remember what you said. we'll hash it out. kevin and kevin, that's what messed me up. it's weird, though, i asked a question of kevin and neither one of you answered. >> they were being polite. >> thanks, guys.

see you. when we come back, if you want to know how the fiscal cliff is going to directly impact you, sure, there's this issue of taxes, but what about the issue of health care costs? we have a scary scenario when we come back. in the world... ...you see they all have something very interesting in common. they have teachers... ...with a deeper knowledge of their subjects. as a result, their students achieve at a higher level. let's develop more stars in education. let's invest in our teachers... ...so they can inspire our students. let's solve this.

care costs. what's the big source of the problem? this is as we get ready to embrace the new health care laws coming in. >> exactly. so will doesn't really impact big companies like citigroup or nbc but it does impact people who buy insurance on an

individual basis and the biggest driver is all the changes coming because of health reform in 2014. >> how does that drive up individuals costs is this we've been hearing about it from small business owners who have joined us here onset who talk about how they've had issues they're facing. >> it's really four things. there's health insurance industry tax that starts, a reinsurance charge pushes up pricing. the would btwo biggest dreeiver individuals will be forced to buy better policies than they have today. so that cost more.other thing is that there's some restrictions on on how much insurers can charge their sickest customers. and the result of that is that you have to raise rates significantly on your youngest healthiest customers. >> what's significantly? >> i think in 2014, we're looking at an average individual rate increase of around 20 on%. but if you're one of the youngest healthiest customers, you could easily see your

insurance rates rise more than 100% in 2014. >> when will people see those bills hitting? >> the first indication is whens insurers start to file their rates for the health insurance exchanges in 2014. so that will start to come in mid 2013. and i think at that point you're going to see some regulators look to try to phase in some of these changes in order to try to mitigate some of the rate shock that the consumers are going to face in '14. >> if everything's supposed to kick into place by 2014, you can really push back some of these new rules and regulations some do you think washington will say maybe we're pushing this too fast? >> i think there is a push and there's a way to do it. a lot of regulations that say we'll make a change to something specific in '14. no reason why that couldn't be phased in over a couple year period. >> i don't get the sense that people recognize the higher rates are necessarily coming, at least not in that order. >> i think your average consumer

out there thinks that health insurance will become more affordable in 2014. if you're lower income in 2014, you are going to get a subsidy from the government that will help to offset that cost. so for certain consumer, the actual out of pocket cost is going to be lower or not increase that much. >> how low income do you have to be to qualify? >> up to 400% of poverty is where you'll get some subsidies. >> so $80,000? >> for a family of four. but what's interesting about the subsidies is that if you make $20,000 a year, you'll get a pretty significant subsidy. you make $35,000 a year as a single person, you'll get a subsidy, but very modest. >> so your health care costs may go up anyway just because rates are increasing? >> correct. >> what's that mean for the mmos and for some of the health care providers who are out there? they'll feel some heat. >> i think 2014 specifically health reform is bad for the

insurers. it puts pressure on margins. all of this focused on health care costs, trends, generally has not been good for for 2013 group actually has some upside, partly because i think there's a pretty good chance that some of these reform regulations do get delayed and things don't start on january 1st of '14, and then as i mentioned some of these specific factor, going to ultimately be phased in, mitigate some of the impact the insurers are facing. >> you have a buy on some of the companies but by the middle of 2013 when consumers realize what's happening, maybe that's the time to get out of the stocks? >> it will be choppy then. at the same time the stocks are trading at 7, 7.5 times miss torqual multiple, 13 or 14 times so you can make the argument that a lot of stuff that's happening in '14 already discounted evaluations here. >> carl, thank you for coming in. coming up we'll head to chairs, we'll talk about twinkies and other important issues of the day.

lot of folks are writing in about the rutgers basketball team. never having been competitive the record of 14-18, 15-17, 15-17, 11-21, 11-20, they've never had a winning record over the past -- >> that's when i was there. they've been good in recent years, too, they got a new basketball coach. >> it gives you the record, tied for 13th, 14th, 15th, tied for 15th, tied for 14th. here, look? we'll talk about it, plus -- i'm sorry, i'm all about accuracy. i'm all about, anyway, cheesesteak for breakfast? >> fifth, seventh, ninth. >> that's little a little focker, has the medals for finishing 11th. charlie's grilled subs' company's ceo joins us to talk food. i think it's nice you love your alma mater. i always wait until the last minute.

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we're back in chairs talking about some of the offbeat stories in today's paper. the one that caught my eye was a story in "the science times" and it is about ecstasy. post traumatic stress, people coming back from of afan stanaf

iraq, rape victims, using ecstasy. people are providing this out of their home, done the studies saying this is helping. >> long-term? >> no, this is helping people long-term. they're not taking it long-term. >> that's weird. >> those who have taken it it's helped enormously. >> the mcafee was telling you bath salts are good for you, too. >> gross. check out my stash. >> you have an offbeat story. >> the harvard business reviewpointed out the day twinkies became cool again. we have never had one of those products in our house. that's part of our stash the things my wife and kids went out and bout these things but suddenly they became cool again. it was nostalgia, when we thought we were going to lose them, we wanted them even though there's not a single natural ingredient in them. maybe new buildings?

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cliff jumper. stocks kicking off a shortened holiday week with a rally on hopes that lawmakers can resolve the looming fiscal cliff. dueling guest hosts to prep your portfolio. harold ford jr. and former white house aide under president bush joe watkins. a look at home grown companies and how they got their start and what they think of the economy. today we're grilling cheesesteaks and talking business with the ceo of charlesy's subs as the second hour of "squawk box" begins right now.

good morning and welcome to "squawk box" here on cnbc. i'm andrew ross sorkin along with becky quick and joe kernen. take a look at the futures this morning after a big day yesterday. s&p 500 looks like it would open up a point and a half down, dow jones off marginally as the nasdaq. through some of the headline this is morning, we are 30 minutes away from the latest earnings report from hewlett-packa hewlett-packard. this is a switch for hp which usually reports after the closing bell. we'll have the numbers as soon as they hit and ceo meg whitman will be talking about the results at "squawk on the street" at 10:40 eastern time. we'll get you another read on the housing market. the government is set to report housing starts for october at 8:30 a.m. eastern. economists are expecting a 4.2% drop and a report likely impacted by superstorm sandy. fed chairman ben bernanke is talking about the economic recovery today, we hope so.

he'll have our lunch time address the economic club of new york and that starts at 12:45 eastern. >> harold ford jr., reasonable and good friend, joe watkins, white house aide to former president george h.w. bush. >> you didn't say he's reasonable. >> joe is right, but harold has potential. >> joe and i have known each other for almost 20 years, go back to university of pennsylvania, but joe and i have been friends for a long time. >> you'with you we'll talk fisc cliff in a second but you want to do a postmortem? >> you can't win without women, and can't win without latinos,

you can't win without young people. you can't win on a single issue, and i just think there were a host of challenges. for me, the whole time, the sense that i had was that it was obama's race to lose, that he had the advantage. anybody look at the electoral college would have to say there were seven or eight easy ways for the president to win, i mean one or two ways for the president to win and for mitt romney, he had like seven or eight different paths that he had to work for him in order to become president in the electoral college. it was obama's race to lose and the president's team did a great job. they did a great job. >> he called together a coalition and ended up in a victory. he said to his supporters, he got hammered by jindal and everyone, lindsey graham said i'm going to use this line as if you're in a hole, stop digging. >> joe, that's not what he said.

he said that the president provided gifts to various constituencies that allowed -- >> if you go back, immigration hispanics and joe biden did float the balloon on gay marriage. >> one of the things we agree, as bipartisanship in campaigns you try to appeal to various constituents and try to say things and provide comfort and assurances you're going to help the country grow. >> inclusive. the 47% thing didn't help. >> without the 47%, if the republicans have agreed on a single, the criminal definition of rape. >> those guys killed us. >> had they adopted a bush approach to immigration. >> where would those guys be -- >> there was one issue that any one of those things that they had done they would have appealed to a broader base. >> you would imagine these would be easy, these are not labyri h

labyrinthian things. romney not only hurt his brand but made it a taller challenge for republicans to put this back together. you can't say we've embraced latino or hispanic outreach organizations. you have to do things fundamentally differently. >> you don't have the benefit of the doubt. >> what a core libertarian or conservative talks about, that is earned success, private sector prosperity, you know, individual initiative, all entrepreneurialship, all that stuff which is what you hang your hat on. to have it obscured by all -- i've told this story now like ten times but the night of the election, i worked late and in that car and there were radio callers, people calling in who had made their mind up in the last week and one guy dame on and gave a treatise on free market economics and

entrepreneurialship but said i'm voting for obama because i'm gay. this guy -- everything i've ever said about free market he's totally with the republicans on this but he can't come into that party because the party doesn't want him and that's not right. >> our party has to broaden the tent. i went to the republican national convention again and i saw about eight people that looked like me, and it's not just a matter of having more people that looked like me at the convention, brown or other persuasion and ethnicities but also policy. you have to have policy that attracts lots of new people. in addition to having new candidates you've got to have policies that are meaningful to people on immigration, policies that work for women, policies that are meaningful for people who happen to be minorities, and you can't ever have the -- >> during the romney campaign i don't remember seeing and this is no disrespect to joe and our friends and even governor romney whom i don't know well but i

don't remember seeing one person of color at any point that he spoke to, that he addressed, that were, that might have been a part of the inner circle. with president bush you often saw secretary rice and general powell, with former president h.w. bush you saw a diverse group of people around him. i just don't recall -- >> including me. >> yes, so i didn't see that much around the governor. >> is it the policy or is it about having the people around him in the pictures? >> he had some -- tara wall is well-known, rnc person has huge credibility. >> in fairness, i did see her on television. >> the people of color from different groups was not great, basically what you saw were a lot of white men. in order to win today, you got to have people that look like america. >> which is why you could be surprised that he thought he was

going to win. he doesn't have anybody telling him anything other. >> the policies change. >> not the fiscal policies but the other policies have to change. >> the social policies. >> doesn't matter if your a social conservative, it means the tent has to be bigger, embrace people who are different, if we want to have a winning coalition, if we want to have a winning opportunity in 2016. >> i'll bet you would believe that the free enterprise, free market solutions that the republican party puts forward over time lift more people into a situation, more prosperity. >> no doubt. >> why does it matter who he's talking to at any given time if more people benefit long-term. you're a free market guy. you know these are the policies that eventually will -- >> joe you wouldn't feel comfortable entering a room if you see no one that looks like you, you understand the person has made comments about women,

suggested that half the country is unresponsive to him because they're not accountable or responsible to the notion of america, and he never really did an if ektive job of defending, explaining or articulating where he would take all of us. this is not to suggestion that governor romney is this way. it's the way his policies were constructed, presented, created a discomfort level so great your story tells it all. you had a fellow who laid out the free market, but he couldn't be for governor romney because he's gay. >> is it the policies of the party -- >> no, the policies end up being trumped by the core 47%. so you might agree with the fiscal -- >> it's the party platform. ultimately if you have to get through the primaries and rely on this core sort of right group how do you do that? how do you get past those policies?

>> you got to have a team that gets you back to the center real fast. >> you're saying lie to one group to get to the other group? makes no sense either. >> it's the sad reality of politics and presidential primaries the groups that vote are more to the left or more to the right so you have to cater to the base to become the nominee. >> the president has to cater to a base and if he's going to tack it all back to the center on certain issues, whether it's epa or even what he does to get over this fiscal cliff he's going to have to -- >> he's got four years and not facing another term. >> he could have to do some things to get the house on board that his base is not going to like and his legacy. >> a year ago today herman cain was leading all of the candidates, just to put it in perspective. >> we'll come back and get your ideas on what we do to fix this fiscal cliff. i change every day on what i think we need to do.

i don't know. let's say we got rid of the sequester completely and didn't worry about spending, went back to the clinton tax rates for everybody. is that the end of the world? >> i wouldn't think so. >> three-quarters of the deficit goes away. >> i think we'd probably have to deal with some of the investment income rates perhaps. >> you're talking from the republican side. >> no, i think we find ourselves at a different moment. i don't think it would be the end of the world but i think we can probably find a more sustainable way to do it, to not push. >> where were the investment rates, capital rates and dividends under clinton, 25? brings it up 20% higher? >> we're in the no huddle offense for congress and we don't have a good track record. congress has not performed well with this president in the no huddle offense. we have two minutes and got to score a touchdown. >> the reason they put in these things were to make sure they

finally got done. here we're ready to delay it again and not face these things. so i don't know. >> by that i mean becky 20 cap gains, cap dividends at 25, i like the schumer idea, look at the democrats senators campaign on raising the number to 250,000 with the exception of one or two, you could find agreement and the president will have an easier time rinning support from some republicans, get the right coalition, this thing gets done quicker, sooner rather than later. >> we'll continue this conversation in a moment. when we return president obama dispatching secretary of state hillary clinton to the middle east. right now oil prices have been steady but this comes after a big jump yesterday. down about 16 cents to $89.12. the outcome of the eurozone finance ministers meeting in brussels is out there. we'll take a closer look at oil right after this. comments? questions?

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take a look at futures this morning after a 200-point plus run. dow would open up 16 points lower, nasdaq off as would the s&p 500. gas prices are steadier but oil above $89, we've been watching what's been happening with the escalating situation in the middle east. the united states is sending secretary of state hillary clinton to the region to talk to leaders of both sides. dan dickers, cnbc contributor and independent oil investor. some of us were looking for iran to be the problem and other things to happen but once it starts it kicks things into a higher gear. now what happens? >> i think all the sources that i talk to and in fact the market is kind of telling me that there is going to be another permanent truce that's going to be agreed to. that's the word that's coming out of cairo and to a large degree i think the oil spike

that you've seen over the last two or three days from what has been an array of images from the media about bombings going on in gaza will be short lived. the oil market's pretty much been in a bearish pattern since late september and before that after libya action stopped in april and i think that will continue going down, we've seen a consolidation area in oil, i think we're at the upper end of that band and this may be an opportunity to short some oil here. >> that's why you don't like oil stocks? >> yes, and there's been a disconnecting between the oil stocks and oil market which is a good thing for us, in this case the oil stocks have shown ahead of time what has been going on to the futures. usually the futures show what's happening with the oil drops and we've seen a drop in the major internationals and the oil

service stocks because of what's been going down in terms of rate counts. this has been interesting in how i've spent two, three, four years talking about how the fundamentals don't matter in the oil market and we're at a tipping point where demand numbers in the united states are going up, supply rates are going up, that's where the rubbers are meeting the road. >> you think that leads us to continued slack demand, the talk of a global slowdown in. >> yes, that's really where the rubbers are meeting the road in the oil market where there is for example talking at the break if we go over the cliff seeing a real recession in the country, 1.5, to 2% growth. lots of indications from china they're slowing, lots of indications from india and there's only so far liquidity can go to keep asset prices pumped and we're really at a turning point where we'll see

oil prices continue the downward move. >> the guys in the oil pits are watching the fiscal cliff negotiations, too? >> absolutely, 100%. where the money moves is what's important for the oil market. it's always been the number one consideration, what are asset prices going to be judged, where is capital gains taxes going to come in if they get some deal, that will affect the oil markets to a large degree. >> do you want a deal or not? >> in terms of what? >> in terms of getting a fiscal cliff deal? >> i personally don't want one, but that's neither here nor there. to wish for asset prices to go down is not the most constructive thing. >> you're not getting a penny. >> no. >> you are not getting a rise above pin because you're short oil. you knew you were coming on. >> i'll quote sarah palin, how is that rising above thing going for you so far? have you seen a lot of rising

above going on? >> we are seeing that. i'll refudiate everything you said. we have a strategory. don't underestimate us. >> the deal is it will be short lived. i think you're seeing that. >> simpson-bowles, you have no faith down the road we could do a grand bargain? >> i would love to see it. >> do you want simpson-bowles? it will do things, could bring capital gains and dividends -- >> i'm just a realist. i think this is where we are in terms of the negotiations. you've got two -- >> are you so short oil that would make up for everything else that would lose value in your life? >> he just wants to be right on oil. >> that's all. i got lots of stocks that will get hurt in the process, andrew. >> so dan, a longer term deal will mean things if you get to simpson-bowles that is going to take capital gains dividends and taxed at the same level at ordinary income.

the ordinary income tax levels are likely to drop, simpson-bowles at 28%, are you okay with that? >> that will drop oil, too. whenever you get assets that are going to get taxed at a higher level than they are now you're going to see a shedding of those assets and that will impact the oil market as well. you'll see oil drop. it's a money play as much as it is a fundamental play. everything is moving towards oil dropping, not just the fundamentals but any deal that comes on the table is going to hit capital gains taxes. that's the first place they're going to go for a compromise. >> would you stay short for long if that were the situation or is this a situation where the market drops and rebounds been the next three months? >> absolutely there's a rebound moment on all of these oil markets and you can see it in the market itself. i tend to look at the curve prices, crack spreads, a lot of things that are deep in the weeds in order to find the moments where i say it's time to stop being short and time to get long again and you know, we're

not there yet. >> a quick check on european markets, moody's downgrading of france's credit rating and eu finance ministers meeting in brussels on greece. in the u.s. we're awaiting a speech from fed chairman ben bernanke, we have a preview and analysis of what traders are expecting today, earnings from hue l hewlett-packard, and best buy, these stories and more when we return. >> time now for today's aflac trivia question. what song by lock stock and barrel was featured in the 1993 film "cool runnings"? the answer when cnbc's "squawk box" continues. isn't major medical enough? huh! no! who's gonna help cover the holes in their plans? aflac! quack! like medical bills they don't pay for? aflac! or help pay the mortgage? quack! or child care? quack! aflaaac!

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♪ rise above coming up next we've got earnings from hewlett-packard, the numbers after the break and a fed look ahead, chairman ben bernanke is giving a speech later today in front of the economic club of new york. steve liesman will be previewing that speech and what the markets want to take away from it. in just a bit the ceo of charley's grilled subs, what it means to be made in america and what all that holds for, onions? we're holding the onions. i don't want to hold the onions. i like onions. "squawk box" returns with the onions when we return.

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we'll get back to the futures after a big up day yesterday, as you can see down less than 20 points as far as the dow jones industrial average goes. and we do now have someone who has agreed, david, to rise above

even earlier than 9:00, rising above with us today at 7:30, david faber, i don't know, did you not change to daylight savings time? are you confused? >> important news from hewlett-packard. joe, the can. is out with its quarterly earnings right now but as part of that earnings release the company is alleging that it was the victim of a massive fraud when it purchased the uk company autonomy at $10.3 billion deal that closed in october of last year. hp is taking an $8.8 billion write-down on autonomy, more than $5 billion of that writedown is due to what hp is calling serious accounting impro price, misrepresentations and disclosure failures at autonomy. last may after dr. michael lynch was fired by meg whitman sources close to the company tell me a senior executive from autonomy came forward with evidence of what they were calling widespread accounting fraud that occurred at the company before

it was bought by hewlett-packard. hewlett-packard began an investigation and now almost seven months later concluded these accounting improprieties inflated autonomy by $5.1 billion. they did rely on the audit the financials when they made the bid to buy the company. the financials were audited by deloitte. sources close to the company allege autonomy pursued a number of avenues to make its margins and growth rate and overall value appear far higher than it actually was. apparently the company was selling computer hardware, first of all it was a software company, what it was doing selling desktop computers, laptops, mouses, they sold them at a loss to supplement revenues and took much of the cost of the sales and treated it as a marketing cost so gross margins would not be impacted so you

show significant revenues without the costs associated with them. these were sold at a loss. the company alleged to have pulled forward sales of its key software product idle and more so to have given money to value-added resalers to buy the product from it, and then so it gave them the money, they bought the product, and by the way those are value-added resellers rather than the regional equipment manufacturers that you would want to be buying the product. it would appear it was the oem buying the product all done to show a significant growth rate, great buy on the part of the key constituency. sources close to the company tell me the investigation conducted for hp by price water house coopers found that it was getting customers to pay a high up front licensing fee for the software but in return charging them low fees over a long period of time for hosting and that it also had companies that

acquired, pursued the same strategy. all of this made margins at autonomy seem as high as 45% when they were closer to 28%. hp has created a new baseline for profitability at the unit, finally aware of course that the organic growth rate of the company hit paid over $10 billin over a year ago it was nowhere near worth that. autonomy is a uk company and been referred to as the fraud office. dr. lynch is a very well-known figure in the uk, so you've got the serious fraud office there looking at it, and hp is also going to pursue its own civil litigation over time but probably will wait to see what happens with the sec and the uk office of fraud investigations. this was a deal done by former manager leo oppetecker who

wanted the split the company up as well. he seemed hell bent on trying to end hewlett-packard. lynch was fired by meg whitman because he came in so far below what were expected numbers at autonomy. one would imagine when autonomy became an hp company they would change the way they did business. >> they overpaid by 100%, number one. when you were describing those tricks, for some reason i was thinking about walter forbes. do you remember -- >> of course i do. >> they had the same growth rates and margins and it was all from cooking the books. >> all revenue recognition. they don't use the word fraud. there's a statement and press release, getting an earnings release they don't use the word fraud. >> why not? >> they're using every other word in the book to say it, but

it is fraud, no doubt about it. one of the larger frauds we've seen in quite some time if it is found to be fact, these are all allegations at this point. >> i have 100 questions. they paid 80% premium for this company which everybody all agrees was moronic to begin with. >> right. >> they're claiming the value of the fraud was $5.3 billion, under what multiple under the ridiculous multiple they started with to begin with? >> what i have heard from sources close to the company, and i'm sure they're going to explain this is they came back after seven months of the pricewaterhouse coopers investigation and said what's the earnings baseline of the company. i don't know the answer as to whether they were still assuming same multiple or whether they lowered the multiple as a result of the organic growth rate being lower, the margins being lower. andrew, let me add there was another $3.5 billion writedown.

>> earlier? >> no, on autonomy this morning as well, an overall writedown of $8.8 billion. hp stock prices down. >> let's take another look at the stock price. it took time for your report to get out onto the wires. initially the street was just taking this down about 20 cents. now it's down more than 5.8%, coming as what you've been talking about that has been hitting the wires. >> the company is out with earnings and they came in at 4.05 a share. >> 1.16 for the quarter, a penny above and they reaffirmed guidance but it's really what you're talking about that's moving the stock. >> they generated about $4.1 billion in cash during the quarter, about $10.6 billion so far this year. the numbers themselves if they'd come out without this might not

be viewed that badly but this is obviously a blow. most of the board was in place when this acquisition took place including meg whitman but she clearly was not in charge. >> what does this say about the board, about the bankers who i believe were paid $30 million, about the accounting firms. >> about deloitte, the lawyers. the board as you know, hard for a board to weigh in. it was henry silverman who said fraud by its nature is hard to see so it's hard to imagine a board say wait a minute. why are you paying a high multiple. they finally got rid of oppotecker. whitman was added since the deal was done. hard to know it was a fraud. interesting to see how poorly the company performed at hp when they reformed the accounting. that being said, hp is committed to autonomy, thinks it's a strong business, just nowhere

near worth -- >> it hadn't been written down at all up to this point? >> no, this had not been written down at all. they've taken a writedown for eds, a goodwill writedown but this had not been written down. they write down $8.8 billion, $5.3 billion is due to world. it's not worldcom, enron, senden but it's high up there in terms of numbers. >> mark herndon would tap the phone calls, what were they doing? >> oh, yeah, andrew? >> pretexting. >> pretexting. >> that was before. >> you need information. that was the board -- >> oppitecker had scars from running s.a.p., there was some legal stuff you wonder about, i don't know, if you sleep with dogs, you know.

>> you do and listen by the way this will be a big story in the uk. this guy lynch is a big deal there so you know, he's going to be facing a firestorm i'm sure it just started, and they're in the middle of their trading day. autonomy, a uk company they got both fronts working. no sense at this point how far the investigations, the s.e.c. has opinion working on it for a while and the uk fraud office, this was brought to their attention some time ago. >> meg whitman has got to be, i need this? i took this job? makes it even worse. >> it doesn't help. >> she didn't do the deal but she's going to take, it's her $12.17 stock at this point down from where she took over. all right, faber. >> she'll be joining us at 10:45. >> okay, good, excellent. thank you. >> all right. >> sounds like sour grapes to me. >>. >> $5.3 billion, i was doing the

math it can't be unless you include the 9% premium. screwed up and now they're looking for someone -- >> it's the company's fault, they fooled us. if it was what we thought it was, it was worth it. you're saying it wasn't worth it all along. >> that's what i'm saying. >> you're mean, that's mean to say. a preview of fed chairman ben bernanke's speech in new york and much more on hewlett-packard. the king of caesars, chairman and ceo gary loveman will be joining us to talk to us about the state of his industry and why he joined the fix the debt campaign. here is what else is on tap 8:30 eastern time housing starts for october and 8:40, michael powell, and much more from harold ford and joe watkins. "squawk" will be back after a quick break.

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you know we've been open all night. is this a trick to get my spot? [ male announcer ] break from the holiday stress. save on groushipping at fedex office. welcome back to "squawk box." fed chairman ben bernanke is going to be giving a speech this afternoon in front of the economic club of new york. senior economics reporter steve liesman joins us from new york with more on that plus louis crandall, chief economist on the

set with us. what should we be looking out for today? >> andrew, i think the first answer is not policy. for the if, time i can remember, chairman is giving a major speech and policy is set not just for next month but for quite some time to come, that's the general direction of policy being easy. what we need is specific guidance on what happens next month when operation twist expires and the expectation is operation twist buying long-term sturts we think it becomes asset purchases on the long end and the other thing i think that happens, andrew s the fed chairman will give an economic review and say like i told you before, the fed cannot undo the damage of the fiscal cliff. i think that will be a strong message in this speech today. >> louis do you expect him to talk about the fiscal cliff today? >> absolutely. it won't be a long one because we know what he thinks but he'll repeat it, he wants to keep that message in front of people. >> is there a surprise you think

could come out of this or is this business as usual? >> it's going to be business as usual. there are two major issues the fed is looking at, whether to extend the asset purchases into the first quarter. he doesn't have to address it, there's not much controversy. the other part is how they restructure guidance about how they'll manage rates over the next three years. there's a lot of controversy about that. >> lou? i'm just wondering, when i look at the guidance thing, they're fixing something it's not broken, it's not the best optimal policy you could imagine but they're fighting over this thing, can't come to a conclusion. they look amateur in that they've had the whole debate out there, not ready for prime time really in terms of they're not ready to make a decision. why change it? >> there's nothing urgent about this. they're telling us what they're going to do with interest rates in 2015 and have a little time to get it right and there's uncertainty in the economic

outlook. you don't want to lock yourself into another guidance now when the economic outlook to be in as little. >> is the goal today to talk, talk, talk but not say anything? >> by not saying something is important, we're staying the course, you know what we're doing, i'm here to say nothing has changed and that's an important message right now. >> becky i think the message on the fiscal cliff, i'm looking at sharper rhetoric than he's had before because he's doing what he can on his side what he believes to be the right thing to get the economic recovery going and what is washington doing but with every step they're trying to undermine that policy. there's no doubt a policy to taxes and the fiscal situation to help what the fed is trying to be doing. >> how far can he weigh into the conversation without scaring people? >> steve every time he talks he

says how it's your job, guys, in congress and in washington. it's your job to do things from here. what does he do, call them a bunch of morons at this point? >> maybe he tells them to rise above, that could be the thing he does. >> you got a pin on you? >> i'm wearing a pin here. >> are you going to bring an extra for bernanke? >> what would be the worst thing he could do today? >> oh he's going to be extremely cautious. there's no downside on this one. what he won't do is talk about anything the fed might do to tighten policy down the road. the one mistake they made over the years they were concerned people would be afraid of the inflation outlook that they constantly talked about when they'd take things back and what we're dealing with right now is all of the expiration of the short term stimulus measures on the fiscal side, he doesn't want to create the same cliff problem on the monetary side.

>> will he undo what happened to the monetary market, investors decided they're coming to a compromise and he gets on the floor today and says you guys aren't compromising, you have to compromise and people will define something from that? >> if he pitches it too negatively he could fall into that trap. >> have you seen the new paper that says the central bank has made the problem worse keeping rates so low for so long and we risk going down the same path as japan? >> there are good reasons to doubt whether low interest rates are having the effect they think they're having. it's more a question of whether they have any fact. they're restraining economic growth at this point so yes i've seen the paper. >> thank you. coming up, caesar's ceo a member of the fix the america campaign, gary loveman. up next, hear how charley's

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welcome back, everybody. shares of hewlett-packard the company's stock is down more than 10% in the premarket after it came out with a statement talking about an impairment charge it will be taking for a company it bought in 2011,

autonomy is the name of the company. they're relating it to serious accounting improprieties. david faber, who broke the story, is saying it's fraud. the can. is not calling it but call it everything short of fraud when they lay out their own internal investigation. $8.8 billion charge related to it, $5 billion of that is linked to serious accounting proprieties, disclosure failures discovered by an internal investigation by hp and forensic review, acquisition made under the last ceo, but meg whitman has to deal with this. she'll be joining david faber at 10:45 to talk more about it. the market is already paying big attention to the story that david faber broke just at 7:30, about 22 minutes ago. the stock is down by more than 10%. also came out with earnings today but that's not the news the street's paying attention to. it's the story what happened at

autonomy and the charges they're taking as a result. >> dow futures probably reflect that at this point. despite the uncertainty hanging over the markets one american made companies is having one of its best quarters ever. bob wright of charley's, thanks for joining us. i can imagine during the financial crisis and afterwards with franchisees, they have to get business, small business loans. that's probably been tough and facing the fiscal cliff you're hanging in there. >> we are, thanks very much, thanks for having me. >> it's like one thing after another. how is it right now, before the cliff and after the crisis, right? >> well, we've been real fortunate through the recession and even during this slow recovery to be able to grow not only our same-store sales but also our unit count. as of today we've got 478 locations around the world, and

we've built over 60 stores, closing in our 500th location before the end of the year. we've got rapid growth, we've had same-store sales growth during that same period of time but yeah it's tough. whether it's the fiscal cliff or you know, the looming debt discussion that we know is coming next year or the ongoing health care debate, these are serious issues and our franchisees know they impact them. we have as i mentioned over 400 stores. 210 individual franchisees so we're a small business oriented company. they're just looking for some certainty, they'd like to know they're in an environment that's more business friendly and of course for the brand, our job is to do all we can to build the brand and help them succeed not only with sales but we're watching costs, too, if they're operating in an environment with higher costs and regulation, we've got to do what we can to help them make a profit and employ people. >> they must be watching negotiations in washington

closely. do they care if taxes go up on the high end? >> they absolutely care. they are truly small business owners, and when you meet our franchisees like so many small business owners around the country, they're in their stores, working the grill, dealing with their customers every day, they're the ones on the front lines hiring employees,ing making decisions whether they'll buy new equipment or build another location. they'd like to know what environment they're operating in. they effect them personally and the families of the people that work for them. >> can you get a franchise alone? is it easier than it was a year ago? >> yeah, credit market has loosened up a bit for our franchisees and we're fortunate our model in the investment on the investment side that we don't have to be highly leveraged and our franchisees don't have to be highly leveraged going in. they're able to pay investment out of cash but whenner this

borrow money they're getting sba loans out there, smaller banks but it is tougher and it affects their growth. that's for sure. >> the smell is killing me here, i mean in a good way. it's 5:00 somewhere or noon somewhere. bob wright, thank you. we appreciate your time this morning and keep it short. >> are you going for the sub? which way? >> i don't know. >> i could eat it but i know he's an ohio state fan. go blue this weekend. i'm going to holdoff. when we come back we'll talk about betting on a deal to avoid the fiscal cliff. caesar's chairman and ceo gary loveman is also a member of the fix the debt campaign. how his business could be impacted if we go over the cliff and outlook for the gaming industry. david faber breaking the hp story just about 26 minutes ago, this is a big, big deal, hp is now saying it's going to be taking a massive impairment charge, $8.8 billion for

autonomy, which is a company it acquired in 2011. it's saying that $5 billion is linked to serious accounting improprieties. david faber it's fraud, impacting the dow futures because it's a dow components. dow futures down by 44 points. >> bring some over, joe. ♪

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washington's big gamble. >> we get this a lot. does caesar live here? >> uhm, no. >> i didn't think so. >> why the ceo of caesars is worried about what happens if the u.s. goes over the fiscal cliff. plus the ripple effects. michael powell, former fcc chairman, makes the december 31st deadline regulation and media industry. breaking economic news. october housing starts as the final hour of "squawk box" begins right now. welcome back to "squawk box" here on cnbc, first in business worldwide. i'm joe kernen along with becky quick and andrew ross sorkin. our guest host, former democratic congressman harold ford, now a morgan stanley

managing director and joe watkins who served as a white house aide to former president xli, h.w. bush. >> and not a managing director. >> no. you're still doing god's work. you haven't cashed in yet. i'm kidding. i'm kidding. >> no more cheesesteaks for you, young man. >> exactly. u.s. equity futures at this hour are down, wow, it was down 20, now it's down 50, you know why? because of hewlett-packard. >> this is a massive drop for hewlett-packard, only the third, it's the third lightest stock in terms of the weightings in the dow components, makes up for 0.8%, but that is a drop. >> it's trading at a ten-year low. >> 88 left. >> could have brought that back in 2002. >> it was a $40 stock not that long ago. >> we don't even go back that

far, unbelievable. let's talk about exactly the details here. hewlett-packard reporting fourth quarter earnings of $1.16 a share, a two-cent beat, current quarter earnings guidance short of street consensus. here is what everybody is paying attention to, david faber talked in the last hour, hp is alleging it was the victim of a massive fraud when it purchased the uk company autonomy, the $10.3 billion deal closed in october of last year. the stock falling to a ten-year low as we said in premarket trading. ceo meg whitman is going to be joining us on "squawk on the street" at 10:40 a.m. eastern. this is a story we'll be talking about all day. i was just looking at, we were talking about bankers before, this is not a good day if you were a banker on this deal so barclays advised hp to buy this thing on the sell side, you had everybody and their brother, frank quattrone, ubs, jpmorgan,

bank of america, you'd think somebody would have caught it. >> people want to get paid. >> nightmare for bankers and deloitte. >> best buy initially up on the news. this is a $13 stock at this point, the can. is reporting three cents a share on an adjusted basis, below expectations, which were up at around 12 cents a share and same-store sales were down in the third quarter, 4.3%. >> why is the stock trading up? the company itself is saying this is an unsatisfactory performance. so the results only strengthen our sense of urgency and purpose, but the president and ceo is saying himself this is clearly unsatisfactory. >> actually now it could be down. it could be moving a little bit

lower. now you can see it down five points or so but it was a $40 stock not that long ago either, now down at -- >> at this point isn't that a gamble on whether there's a takeout? either it's a takeover or it's not. >> the guidance they're giving is looking at free cash flow, for 2013 they're saying 850 million to 1.05 billion for fiscal 2013, comparing with the company's previously given guidance of $1.25 to 1.5 billion provided back in august, so they're lowering the free cash flow guidance as well. >> i had a story last year, i buy the tv set for christmas, then over the weekend, the price went down at best buy, i go back to best buy and the price is lower than when i bought it two days ago. oh, no, we can't match the price that we got for the weekend and i go but i can take it back? yeah, you can take it back. okay, so take it back and then i bought it on amazon. they wouldn't give me the credit. >> i told you the worst story was i go in and look for the

stuff but with no intention of buying and the guy wants to help you and you don't want him to help you and you have to get out of the conversation at the end because you're not going to buy the thing and you say i'll come back with my wife, some kind of nonsense. >> you say that in. >> what would you do? >> it affected you.. you said i'm coming back and you never did? >> i bought it on amazon. >> guy is still looking for -- you bought it on amazon. our newsmaker of this hour is part of the fix the debt ceo leadership council. the group wants washington to rise above partisan politics to reach a budget deal before the end of the year. gary loveman is caesar's entertainment president and ceo. great to have you here. >> great to be here. >> why is this an important issue? what happens if we go over the fiscal cliff? >> it would be an unpleasant experience for a company like everyone, for a company like mines that depends on abrupt reduction in gdp and rise in

unemployment and concern for the country doesn't bode well for us and all of the ceos. we see this as an eminently preventable problem. as pragmatists there are a number of solutions and with he need to get one. >> gary, until the last week or so the market seems to have factored in the idea we'd get a fix to the ifisical cliff. have you seen it at all in consumer spending that you monitor coming in? >> our consumer gaming center has been lower in the last few weeks. >> if you think there is a deal to be had you're looking not only for an aversion of the fiscal cliff but maybe a broader deal beyond that? >> a broader deal. there has to be entitlement reform to address what's going on with the escalating cost of the government's undertakings and some expansion of revenue. we would hope through a broadening of the tax rates.

we have a weak economy so the timing is important. you don't want to do something that makes a fragile economy immediately worse but you want to put the country on a sustainable path for fiscal x n discipline for a period of time. >> our guests have offered us insight into what two sides are thinking. harold, when you hear an idea of broadening the base without necessarily raising marginal rates do you think something like that is going to happen? >> possibly. although i would ask all around the table, particularly gary, you've had secretary geithner and the president, and i think it's fair to say if there was one specific thing president obama campaigned on, it was raising revenue by raising the rates on the top earners as a part of any deal. secretary geithner said you can't limit deductions and credits enough to create the revenue going forward to sustain, put us on a sustainable fiscal path. could the fix the debt campaign

embrace the marginal rates as well as address what we all know the entitlement challenge or the real money is and joe's talked about this eloquently as well, could you embrace a revenue plan that increased rates on top earners as well as a plan to avoid going off the cliff? >> one of the premises is nothing is off the table. there if that has a broadening of the base and entitlement reform and entitlement reform is certainly the top item on the list of things that needs to be handled. >> top earners, would that be 250, would it be a million? what would you say? >> i don't have a big dog in the fight as to where that cut would be but if you're really trying to generate income for the government's accounts it would have to be at the 250 threshold. as you escalate the threshold you get to a smaller and smaller population. >> unless you broaden the base. i can sell broadening the base

getting at a whole new pool of money that democrats, if they just looked at it and realized what's there. >> broadening the base means a lot of things to a lot of people. >> they're jonesing for this four point increase which rich people you don't get at them with ordinary income. >> i think the issue is much of fairness. >> fairness? 10% pay 70%, harold. >> you want to trade with the bottom 30, i'm sure they'd take the trade. >> it's a progressive code still. >> i'm not here to make the argument for that. i'm looking, we find ourselves at a moment at an election with consequences, one of the leading republicans in the tea party, allen west, congratulations to patrick murphy who beat him, one of the loudest tea party members, perhaps they get closer to getting a deal. the president won by saying he wanted to raise revenue. >> won for a lot of reasons, i don't remember him pounding the table. >> joe, he won.

i'm not here to litigate -- >> you've got domenici and rivlin, simpson-bowles, his own panel and they're talking 28%. >> i've written and said repeatedly that the president should have embraced that early on. >> that's 28, not 39. it's below where it is now. >> he argued for this, the only reason i asked gary the question is we are now less than 40 days away from a big moment and the question is how do we get beyond it. we have a 50/50 chance of going over. >> the president is willing to take a bungy jump over the cliff if republicans don't move where he wants them to move? >> austan goolsbee is quoted in the "wall street journal" yesterday saying if the president does not have the debt ceiling challenge attached to it or addressed in it, that it's his belief that the president's not going to sign it. he didn't say he'd go off the cliff but you don't have to be that bright to know what that means which is the only reason i

asked gary as we look at big, medium and small business leaders, how willing are they over the next several days, next few weeks to say mr. president we're willing to go with you and willing to ask republicans what is it you have to have as a part of this deal. otherwise we find ourselves in a big, big mess here. debris it would be unpleasant and painful for companies like yours and many others. >> will the house go for just extending 250? >> nope. >> they will not do it. >> nope. >> it's been two years the president has been saying it. >> nope. >> first i thought it was about re-election, i thought he was backing the republicans into the obstruction corner making them look bad and driving their approval rate down. now the election is over -- i want to broaden the base. i don't care about that. >> you're talking about going after capital gains and dividends. >> i don't want to go through marginal rates. i want to do it through

deductions. >> the math never gets you there, many say. >> the critical argument in this whole discussion is that you have to attack all of the elements of this. >> i don't think we have enough time to attack all of the elements and get consensus. >> how does the short term deal get to you a better long-term deal where you work out a lot of these things? >> you have to have the gross anatomy of this put in place early on. the driver of the federal budget problems principally is entitlement problems and you have to feather in a resolution at the same time. as an economist if you want less economic distortion and you want the country to have the biggest pie available for distribution, however politicians seek to distribute it, you want to broaden the base, generally seek to reduce rates, generate economic growth and all of us can fight over how we want to distribute the gains of that, but this notion of walking up to a cliff at the end of the year that will lead to an immediate

reduction in gross domestic product, this is people holding gasoline over each other and each holding a match daring to throw it. >> 250 and above, that's 80 billion on a trillion-dollar deficit. >> you might have to do a combination of both though. to actually get to the real numbers that we're talking about. >> it depends on -- >> if you assume, and -- >> see the promise people see broaden the base as a euphemism for -- >> making people pay taxes who aren't. >> not just 250 and above. >> broadening the base of money that is available for taxation. >> taxing everything at ordinary income rates. >> it's an enormous document littered with deductions. >> what is your effective tax rate. >> in the 20ish percent rate. we have a lot of other sources of income so if you say to

someone like me your deductions are going to be capped at a certain level, $100,000, do whatever you want, knock yourself out. at the end of the day you'll write $100,000 at the end of schedule a, and bring your rate down, there will be less economic distortion in the higher rate of growth and the government will have more proceeds in its treasury. >> we've heard people say that's more likely a solution because it avoids the home mortgage deduction or going after charitable donations, you don't take out any of the sacred cows. >> this is crazy. let's say you have your $50 pot of deductions, ultimately it will hit the mortgage deduction and hit the charities and hit everybody. >> as a politician you don't have to say you're the one. >> if it were 100 it would hit most people. >> republicans argued forever you can't raise taxes because, and you frankly have to lower taxes so there's more money in the system. >> that's right. >> what we're talking about effectively no matter how you square it is raising taxes so

there's less money in the system. >> this is probably the reason why i don't have confidence. you asked me at the beginning of the show what was my prediction, were we going to make it? i'm not confident based on past performance of congress i'm not confident that we make it. we don't have enough time. >> there must be something to leaving money in the system because you won't raise below 250. you do realize, you only want to do it on the top 2% because there's some notion it would hurt the economy if you raised it on everybody else. >> absolutely. >> the people making 250, depending on what part of the country 250 is not a big number. two kids in college, a mortgage? >> he has made clear he does not want to impact and i'm not here to make the case this is the right course. i'm not a member of fix the debt but i share their goal. the president said he will do nothing to impact adversely

middle class earners. talk about closing and limiting deductions, you have to measure that, too. they believe in fairness. part of the argument for raising taxes on the highest earners if you're going to reform entitlements you have to do it in a fair way impact everybody. i'm not sure the way they want to do it the best but with 40 days left we better figure out how to get closer to one another an further away. i applaud fix the debt but at the end of the day we're 50/50 in getting this done and republicans, they lost eight seats in the house, democrats picked up seats in the senate and the president campaigned on one thing specifically, raising revenue by raising taxes. >> my own commission said lower rates to 28, why would i try to be raising. >> if you didn't embrace one could argue that wasn't your commission. >> he didn't embrace. >> he didn't embrace the findings. >> gary loveman is staying with us and we'll continue after this break. stocks for your portfolio?

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welcome back. if you are just waking up the big story of the morning is hewlett-packard, the company came out with earnings, but that's not what the market is focusing on. they said they are going to take a massive impairment charge of

$8.8 billion for a company autonomy that it purchased back in 2011, they say $5 billion of that is linked to serious accounting improprieties. david faber says it's fraud. he's using that word, he brought the story to us first at 8:30 and he will have meg whitman joining him on "squawk on the street" later this morning. that dow component down by 10.9%. we'll see where it continues to trade. we'll take a quick break. when we come back caesar's gary loveman takes a gamble on "squawk." stick around. , and save your money. joe doesn't know it yet, but he'll work his way up from busser to waiter to chef before opening a restaurant specializing in fish and game from the great northwest. he'll start investing early, he'll find some good people to help guide him, and he'll set money aside from his first day of work to his last, which isn't rocket science. it's just common sense. from td ameritrade.

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we're back right now. gary loveman is caesar's entertainment chairman, president and ceo. we were having an interesting conversation during the break about charity. you're a pretty charitable guy and one of the things that may happen in all of this depending on how we deal with deductions is charitable deductions may go away or at least be limited. how is that going to change for example your own giving? >> well i think economists have to argue when the price of giving goes up you do less giving. i don't think it would affect me very much. it could affect some more modest contributors. you have another issue in the american tax system the estate tax so people in my circumstances are not planning against their current year's tax obligation, making sure when they meet their maker they're not handling all of their life's work to the proceeds of government but instead to worthy causes. >> what is a fair number for the estate tax? >> i think very, very few

americans should pay an estate tax so i think the threshold should remain close to where the president set it, many millions of dollars so you're looking at estate taxes on very wealthy people so maybe the threshold is $10 million or $15 million and you disemploy legions of people who spend their time trying to circumvent that rule. >> but is it funny we always say that people would like to leave their money to a worthy cause rather than the u.s. government. that rings, i hear it. i hear it every time someone says that because do charities spend $1 more effectively and better way than the u.s. government? the u.s. government takes care of those that are in need. >> 2% of gdp is about $300 billion. >> the charity you give your money so you're exerting much more control over what it does. >> it speaks volumes about the effectiveness of government and that people really do want to give it to a place where they know -- 99 cents will be wrung

out of every dollar instead of 32 cents. >> you have a situation going on at your church. >> i'm sure i'm not alone. >> we've got the same issue. >> it would have to be, folks who make contributions who are making yearly annual commitments and worried about this number going up or deductibility being limited who may not be in the same circumstance gary is but who are making 5,000 to 10,000, 15,000 contributions to the church and saying i may have to reduce that if taxes go up, rather if we change, if you put some limits on deductibility which will impact medium size, small institutions that rely heavily on charitable donations. >> we are all talking about it broadly but do you think we get there on charities? >> i haven't heard it rise to the top of the discussion really. i think these other issues soak up so much oxygen it's unlikely that charitable deductions will be prominent. >> here is one positive. you look at the four major

plans, simpson-bowles, the ryan plan, domenici-rivlin, the gang of six, they agree from territorial tax system and agree on social security, restricting eligibility, raising the age. the departure is on medicare, and simpson-bowles doesn't speak to it, the other two closer to ryan. we can find ourselves at a starting point. it's unfortunate we have less than 45 days to get it done but the reality is we have to figure out how to get it done and there's enough body of work on the table. >> all of the wnz you mentioned talk about lowering rates. >> no doubt about it. >> you're still arguing the other side. >> i'm not. >> you're assuming the president's rationale. he sees the same thing. he saw domenici-rivlin and gang of six and simpson-bowles. why still hang your hat on that in. >> you have to bring him and secretary geithner on the show.

>> you're giving up now. >> we have to run but if i want to grow caesars, i got to lower i assume your corporate tax rate? >> no, because we're a levered company we don't pay much in corporate tax rates. that's not my problem. if you want to introcaesars, make sure we don't run into an immediate recession, avoid the fiscal cliff. >> they're going to kick us out but gary thank you for being here.

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welcome back to "squawk box." rick santelli here. we have housing data, 849,000. 849,000. on the starts at 866,000 on the perl permits. these numbers are within the expectations, and you could see that news systems sometimes aren't right on. i was looking for a bit less on the starts and the permits. i was looking for 840,000, so we're a bit more there and i guess the news here continues to be the improvement, how do these numbers stack up? if we look at the recent data points, we could see 872 is still somewhat the high water mark of the year but look at some of the data we were getting just a year ago in the high

fives and low sixes, so whether you're looking at the national association of home floridas index yesterday, marching up to the best levels since may of '06 or starts and permits, i would have to say that i can't tell you if every region is going to have hot housing market as some of the stories i was reading about in miami, but there seems little doubt at least at this point before everybody starts tackling deductions like home mortgage interest, that it's trying to get a bite and trying to grab. rates kicked up maybe a basis point. dollar index under duress and doing better again, the dollar that is on the yen and that has been one of the big trades last several weeks. back to you. >> rick, thank you. steve liesman is standing by in new york and steve the big thing coming up today has to be when bernanke is going to be speaking. we talked earlier about that. what really do you expect to hear today? >> not unrelated to the report we just got, becky, i think that's a good question because i think bernanke is going to be relatively pleased with what's happened to mortgages.

i think there are some on the fed who wanted more of an impact on mortgage rates, given the fed's decision to buy $40 billion in mortgages on a monthly basis, but what they would argue is that the effects are yet to come, because they would say that the effect of fed purchases come with the total stock that the fed owns and/or is taken off the market rather than the cumulative purchases and they really haven't had a chance to wind up, if you look at the fed's balance sheet it hasn't changed very much. >> seriously? >> yes. >> wow. >> i think the fed is going to see, be relatively happy about what's happening in the housing market, this decline is within the tolerance, you had a big jump in october, people expected something, sorry, september, people expected something of a giveback in october, maybe a very slight, i didn't get to see the northeast numbers, maybe a very, very slight sandy effect in that some things didn't happen at the end of the month

but you did have a large part of the month not affected by sandy, if there are sandy effects in the northeast they'll probably show up in the november data. >> although steve it seems to me a lot of the stuff the fed is doing has to be around the margins, a bigger impact on what will happen on housing price has to be what's happening with the jobs outlook, with the economy and frankly if people can get mortgages or not. that's been a big question. >> i think those are the two key things that are happening, employment is -- as well as what's happening with the credit availability and bernanke spoke about that last week saying it seemed that some banks were being tighter than they needed to be, he talked about the potential for discrimination when it comes to african-americans and latinos in the data shown up and says the fed is urging lenders to lend where it is prudent. obviously the fed is concerned about bank balance sheets right

now, and beyond that, becky, those are factors number one and two, employment and credit availability and the third one the interest rate, the one the fed feels it can effect and trying to effect. >> it has been affecting. not just trying. >> if you have a mortgage chart, becky, it looks good but not great. i've had some fed guys talk to me, you know, a little bit on background saying they wouldn't mind seeing a two handle on mortgage rates. >> holy cow. >> they think it's possible, but really the market's been a little bit reluctant to go that way. you had some effect, it's come down if you look at 309-year mortgage, 10, 20 basis points. the question is will it come down more? what is the effect of this cumulative purchase -- >> it seems crazy this idea already for a bank to lone money for 30 years at 3.5%, you have to think things are going to be really bad for a long time to come. if you want to get that number down below 3%, you'll have a rough time, because if i was making decisions at a bank you

don't want to get tied into those things. it's a 30-year mortgage you the consumer has the right to get out of and pay off at any time you want. >> right. >> me the banker you're stuck with if things improve and turn around and you can find better places to put your money. >> i agree but the question becomes what is your cost of funds, what is the profit on the loan, what is the fica score of the borrower. >> and how long you keep rates low. if you're keeping them low for the next 30 years i'll write the mortgages. >> most people don't hold on to the mortgages for 30 years. the average life of the loans is seven years and the other part of that, becky, is the fed is out there saying i'm out there to take you out, which is another pretty important aspect of the banks writing these loans. one of the big uncertainties is dodd-frank. we haven't heard the issue of how much the banks have the retain of the mortgage pools they write. the end of the day, there is not enough money going into the

housing market. i went back and looked just before this number came out. if we were doing $1.4 million, $1.5 million housing starts a year at an annual rate that would be nothing, that would be a rather mediocre and now we're arguing over, not arguing, over whether 870 or 850 on an annual rate is a good or bad number. it could easily be double and be rather mediocre by itself. there is a huge issue as you point out of capital commitment to the housing industry, as well as demand. >> steve, thank you. >> my pleasure. >> our thanks to rick as well. coming up, we'll talk about the fiscal cliff and what it has to do with cell phone carriers and cable companies. we got the answer coming up from former fcc chairman michael powell. first as we head to a break look again at shares of hewlett-packard as we hear "call me maybe." you see the stock there down $1.30, almost 10% in premarket trading after revelations of

potential fraud at autonomy before they bought the company. we're back in just a moment.

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folks, what are we doing? we're arguing is what we're doing. we're trying to rise above, encouraging wash ush to rise above. >> he's saying i'm with you. but i got these other guys we have to satisfy. >> i'm trying to rise above. >> you're with me though. >> will you wear a rise above pin? >> if they give me one. >> i will wear one. >> we'll get a pin in the next break. we are trying to rise above and trying to come one a real solution for fixing the debt. we'll see about that. michael powell is the former fcc chairman and current president of and ceo of the national cable and telecommunications association. we're hoping you're going to rise above with us. >> we are all lifted. >> we are all lifted. talk a little bit about the telecom industry. has it hit the telecom industry next? the "wall street journal" had story about scaling back of expenditures and at&t announced they were going to spend $14

billion. >> they are dealing with the continued extraordinary explosion in the information age and techor and continue to make investments to capitalize and deliver on the promise which is one of the reasons why we're so focused and concerned about the fiscal cliff because anything that puts at risk the chance of returning to recession, having the return of unemployment at 9% to 10% or cutting into the discretionary income of the american household is something that significantly impacts our businesses. >> michael you're a washington guy, handicap it. we've had lots of people give us their over/under on what happens. january 1st where are we? >> i believe they can get something done. i have no idea what the something is. i think only john boehner and the president of the united states right now have the most information about how that will

unfold but you know what? the night of the election everybody told me it was going to be a long night and we'd wait weeks and weeks and it was over by 11:00. sometimes this institution when under the right pressure can surprise you. the fiscal cliff is a policy choice, the leaders instituted this to make good on their actions and they better make good on the public. >> i got a telecom cable question. jeff bucchus. >> he made the input, joe, andrew. your question is you changed the input on the tv and you get -- >> he says you shouldn't worry about cord cutters, they should worry about cord nevers, entire generation of people not hooking themselves up at all. do you agree with him?

>> one of the things we're seeing in the down economy is so many young people are moving back home with their parents, seeing less of the young college kid opening up his apartment, calling up the cable guy, connecting up and being committed to the programming. lots of programming is available online. one is the critical marquee program that is the premium that drives our collective water cooler conversation in this country, homeland or madmen. >> "squawk box." >> yeah, "squawk box." >> thank you, michael. >> there you go. these are the shows that can be found on that plaz platform and seem significant to the american television viewer. >> you have spoken at length about the regulations and footpoint needed to help the industry grow and continue the investment.

>> when you have proceedings that get opened and seem to never terminate, when you can have a continued gyration about the outcome of these things, business is adaptable but had to know with some clarity what it's adapting to so we're looking for increased certainty around an emerging communication space that's filled with ambiguity. secondly you want the incentives to continue significant investment of risk capital and believe the regulator has the understanding of the cost-benefit analysis of the regulations. one last thing about the election, everyone squiz it as a status quo. we'll see a wholesale swapping of who will lead with the regulatory agencies, new agendas and skills and talents and important to the u.s. economy of the quality of those regulatory leaders and the agendas.

>> mirkle do you expect it harder to do a deal in the next four years? we saw what happened to at&t when they tried to do a deal earlier last year with t-mobile. >> it's hard to say. ftc and the anti-trust decision, who will be leading but i continue to believe that deals are slightly tougher under this administration that's a relatively natural cycle. >> this is not an opportunity time for firms and private equity given the environment? i talked to a friend in private equity said this is an opportunity time. you can buy distressed companies, you can gut them, and you can hire back, may sound a little mean but you can hire back the best employees and grow them and make money. do you not see this as a time of opportunity for folks in private equity? >> when i was in private equity we seemed to say that frequently that it was a time of

opportunity. there may be that kind of opportunity in the marketplace with companies that are struggling. i think from the governmental regulatory review process, it continues to be significant. number of times in the last few years we've seen some of the private equity deals run into enormous headwinds having underappreciated the regulatory risk associated with that, and i think that should be factored in much more fully than it is at times. >> michael, we appreciate your time this morning. >> thank you. >> thanks again. we'll see you soon. >> no cable? >> no cable, that's what people -- bucchus said it. >> they get it from a wireless feed. you may not have an actual cable coming into the house but you'll get it all. >> wireless and people get netflix. >> no, no! >> i don't want to, you know? >> you got to think this through. >> they will find their way to "squawk box." don't worry. z>> yesterday, we had a big rally, would you call it the

rise above rally? i think they started listening to the campaign here, people, the word got out. maybe they will do the right thing. >> either that or the dow was already down 1,100 points. >> there was the idea yesterday people will potentially rise above. >> look how handsome you are now. >> watch the futures turn around. cramer is going to sound off on hewlett-packard. that was a little stumbling block for rising above, autonomy was definitely sinking below on those accounting irregularities. hewlett-packard, best buy and tomorrow a man never afraid to speak his mind, wow, we got dick back, that will be fun, dick kovacevich may have said no to uncle sam's t.a.r.p. offering but yes to rise above and spend time with us on the set tomorrow at 8:00 eastern.

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let's get down to the new york stock exchange. david, you brought us the story of the morning. i know you two will weigh in on this. jim, i have seen your thoughts too. you are telling people to stay away from hp and you are sorry for being positive. >> i felt tough in the interview but i wanted people out of the stock. bonds have come back a bit. cash flow wasn't so bad. bonds reflected negativity. congratulations on a great story broken which is going to affect everything today. >> i mean, listen, what will get lost is that hewlett packard numbers weren't that bad. first half of the year they're going to play catchup in the second year. they did stick with overall numbers. they did generate cash. you're right. this fraud -- i'm using the word all of the language they used, they didn't say the word fraud. it the is fraud. that's what they're alleging.

we reported it in some detail and we will again at the top to refresh people of what's going on here. it's one of the larger frauds we've seen in some time. >> where does it compare to enron? >> well below enron. >> you're mr. fraud, mr. alleged fraud. by the way, best buy, terrible. the cash flow down dramatically. hewlett packard the cash flow is good. trying to find something positive here. >> you guys are going to have meg whitman on later in the program. david, as you pointed out, this was not done on her watch but she has to deal with the cleanup. >> exactly. she's the one who has already been dealing with the cleanup as we reported they began the investigation in late may. it's already been going on for a number of months. and as you say, it was leo that did this deal. there were plenty of doubters

about autonomy who doubted it. the management that bought the company was wrong. >> i beg you to ask meg just one question. just $5.3 billion number. ask where that number comes from and whether that's based on the multiples that were used in the transaction originally. >> it isn't. you asked the question earlier. i've been trying to figure it out. my sense is although i need to talk to more people, they made an assumption in terms of a multiple based on the group and growth rate and margins that were real but how you back into that number and what the real value of autonomy is still -- i don't have the full answer. i'm not sure they used the original multiple to do that. >> think about what it takes to dislodge both fiscal cliff and hostess twinkies from our discussion. it takes major fraud at hewlett packard and decline in best buy

cash flow. it was a nice interlude while it lasted. >> you enjoyed it. >> twinkies. >> we'll see you shortly. >> committee to protect journalists. >> i'll see you tonight. >> coming up, stock of the day. the last word from our guest host harold ford and joe watkins and don't forget to watch as hewlett packard ceo will join david faber at 10:40 eastern time to talk about earnings and a lot more this morning when we come back we've got it. can i help you?

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let's get back to harold ford and joe watkins for the last word. i decided that what you have told me basically is that

simpson-bowles rksz simpson-bowles, i think that's the answer. you brought it into focus with me. i think it would be easier to get simpson-bowles with boehner than with president obama. i don't think he's a true believer. >> we can have that debate but we're 40 days away from going off a cliff or small hill depending on who you ask. the question is what can each side give to get us where we need to be. >> but now you are really just talking about kicking the can again. >> i'm about rising above and rising above calls for compromise. >> i think harold is prepared. >> you are a simpson-bowles guy. >> the challenge is the president has drawn a line in the sand saying i want a pound of flesh period. don't get me a number. don't say a combination of spending cuts and a combination of discretionary of entitlement cuts and some tax increases. he's saying there's only one number. there's only one number.

you got to give me that number. don't give me that number, the rest doesn't work. the problem is -- >> the country voted for him whether we like it or not. i like it he was re-elected. democrats picked up two seats in the senate. >> the country voted for him and they're going to say no, no, no. >> you'll be surprised. i think there will be a number of republicans in the house who are going to come around. there will be enough to come around. they may have to raise that number to half a million or million. >> then you don't raise money. then it's symbolic. >> you raise more than you think. >> around 250 you raise 80 trillion. >> there's too little to cover in too little time. >> raise $50 billion a year with people over a million. >> they get to a toothless agreement that gets over the fiscal cliff but doesn't deal with fiscal abyss. >> the president and republicans are close to agreement around